PARIS – Total still sees tremendous potential for oil exploration in Kurdistan and has continued to invest there despite warnings from the Iraqi central government that doing so could jeopardize its projects in the south of the country, a person familiar with the matter told Dow Jones Newswires.
Total expanded its Kurdistan assets Monday by acquiring a 20% interest in an oil exploration block there from Canada's ShaMaran Petroleum Corp for $48 million in cash, plus a reimbursement for costs incurred from April 1 until the closing date. An exploration well is currently drilling on Taza, which is located approximately 80 kilometers southwest of the city of Sulaimaniya.
The move underscores the intense interest in Kurdistan despite the tense political backdrop, as major energy companies like Exxon Mobil Corp., Chevron Corp. and OAO Gazprom have ignored warnings from Baghdad and piled into the oil-rich region.
"Total has been seeking to get into Kurdistan simply because it sees there tremendous exploration potential, as much as the 30 or so oil companies which are already there," the person familiar with the matter said.
Following Total's entry into Kurdistan in July, Iraq's Deputy Prime Minister, Hussein al-Shahristani, told reporters in Baghdad that it must end its dealings with the semi-autonomous region or sell its stake in a major southern oil field, Halfaya, according to a report from Agence France Presse. He did not specify the time by which Total needed to make a decision.
The French oil company hopes the current situation will simply deflate, allowing it to remain in Halfaya and keep its assets in Kurdistan, said the person familiar with the matter. They have adopted a wait-and-see stance, hoping that the Baghdad authorities, after much outcry, will leave things as they are, the person said.
"After all, Exxon has been threatened, but nothing happened so far," the person said.
Also, Total hopes the recent resumption of oil exports from Kurdistan, in a concession to Baghdad, will ease tensions, the person said.
Iraqi authorities have blacklisted oil companies that have entered Kurdistan from signing future oil deals in the center and south of the country. Initially, it was only small- and medium-sized oil groups that flocked to Kurdistan, but Exxon Mobil initiated a rush of major players last year.
International oil companies are increasingly drawn to the region, as contracts to re-develop old oil fields and explore for new ones in southern Iraq turn out to be less attractive than anticipated.
In late July, Total acquired a 35% interest in two oil-exploration blocks in Kurdistan from Marathon Oil Corp., a semi-autonomous region in northern Iraq, just days after the central government in Baghdad blacklisted Chevron from contracts in the rest of the country after it entered the Kurdish region.
Copyright (c) 2012 Dow Jones & Company, Inc.
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